SMBs stand to benefit from digital transformation

Wednesday, July 6th, 2022 01:56 | By

Africa’s working population is expected to reach 450 million by 2035, in line with general population growth. According to the 2017 Africa Competitiveness Report, if current economic growth trends continue, only 100 million jobs will be created by then. This means millions of Africans, many of whom are waiting to enter the labour force, will have few options for gainful employment.

Struggling to make ends meet often drives people to extremes, adding to discord and insecurity. The World Bank estimates that 7.7 per cent of Africa’s current labour force is unemployed, up from 5.7 per cent in 2013. The trend is likely to worsen as the number of job seekers outnumbers available opportunities.

According to a 2018 publication by International Trade Centre, Small and Medium-sized Businesses (SMBs) have long bridged the employment gap in sub-Saharan Africa, employing approximately 80 per cent of the labour force. Unfortunately, the onset of the Covid pandemic, combined with strict containment measures, had a significant impact on small businesses, reducing productivity and sales and even forcing some to close.

Regardless of the negative impact on businesses, the pandemic accelerated reactive and opportunistic digital transformation as businesses coped with stay-at-home orders, social distancing, and forced closures. While it begun out of necessity, as the benefits of digitisation became clear, many businesses embarked on a broader digital transformation journey. 

With decreased in-store customer footfall and reduced spending, SMBs experimented with new technologies to re-establish and improve customer interaction. Use of social media for customer acquisition and support, sales, and business productivity tasks became commonplace, while emerging Web 3.0 technologies, such as Augmented Reality for applications like remote machine maintenance, also gained usage.

Additionally, SMBs realised that as they streamlined their operations to include digital aspects, they were increasing the amount of data they had, not only about their customers but also on their business operations, allowing them to further optimise their processes.

None of this would have been possible if the environment for SMBs had not also adapted. Businesses operate in a complex ecosystem that includes other businesses, customers, competitors, regulatory agencies, and socio-cultural and economic conditions. Digital transformation through the height of the pandemic was spurred by its impact on the entire ecosystem.

SMBs rely heavily on the social architecture that surrounds them, using their deliberately created networks to find new and nourish existing relationships. Furthermore, SMBs consider these networks a primary way to fill information gaps they experience while adopting digital transformation, given that they often do not have dedicated tech teams to navigate new technology. This social architecture of SMBs governs how they respond to new challenges and opportunities, and was vital to how they survived the pandemic. If these networks remain stagnant, businesses are also likely to remain stagnant.

To sustain and grow the progress made in digital transformation thus far, ecosystem-wide changes are required. Individuals and businesses within them must all undergo changes in order to promote digital transformation. Individuals’ ability to use existing technology and adopt emerging ones will be critical in assisting businesses to continue down the digital transformation path.

Most importantly, there is a significant need for more research into what SMBs and their ecosystems - creditors, suppliers, customers, and regulators - require to make large-scale digital transformation a reality.

The world celebrated MSME Day on June 27. While we celebrate the sector and consider ways to help it recover from the pandemic, we should also shift attention to how all players can support digital transformation to drive SMB growth. The pandemic has given us a fresh impetus and while its digital transformation was reactive, businesses quickly discovered digital tools to be valuable, if not indispensable, in terms of future growth.

As Africa’s population grows faster than anywhere else on the planet, we are at a crossroads where governments, large corporations, SMBs, and even individuals can choose to support digital transformation or forego the opportunity to contribute to business and economic growth in order to sustain an ever-growing population. Transformation is only possible if all parties collaborate.

— The writer is a Senior Applied Scientist at the Microsoft Africa Research Institute

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